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What went wrong

Greed on Wall Street and indifference in Washington: This unseemly combination is what led us into the deepest recession in American history.

And it could have been avoided.

So reports a panel created by Congress to look into the financial meltdown that rocked the nation from late 2007 through mid 2009.

Not since the Great Depression of the 1930s have times been so hard on Americans. We have been slow to emerge from the turmoil that caused the loss of over 7 million jobs, the rise in unemployment into the 10-percent range and the repossession of more that 2 million homes.

According to findings just issued by the Financial Crisis Inquiry Commission, the Great American Recession was far from inevitable. The panel determined that bankers got rich by creating trillions of dollars in risky and murky investments - something that federal regulators, who ignored the warning signs, failed to prevent.

“The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done,” the FCIC report concluded. “If we accept this notion, it will happen again.”

Fault was found with misguided thinking or lax regulation in both the Clinton and Bush administrations. The current chairman of the Federal Reserve, Ben Bernanke, and his predecessor, Alan Greenspan, were singled out for failures to respond adequately to the stock market crash or to foresee the warning signs.

It was Mr. Greenspan, the report said, who took a hands-off stance for decades, to the delight of Big Business. His beliefs that market flaws were self-correcting and that Wall Street could police itself have been repudiated.

In particular, the Fed declined to impose higher standards on lenders to limit the spread of shaky subprime mortgages during the housing boom. Backed by those mortgages, exotic, complex and little understood investments were bought and sold, creating huge profits until the hollow and hyper-intense dealings collapsed.

“A combination of excessive borrowing, risky investments and lack of transparency put the financial system on a collision course with crisis,” the FCIC determined.

The commission, which was established by Congress in 2009, issued a 545-page report after years of fact-finding and analysis. It heard from over 700 witnesses and reviewed millions of pages of documents.

Unfortunately, the panel split along partisan lines. Six Democrats supported the conclusions of the study; four Republicans dissented. Three of the GOP commissioners blamed the recession on an international credit bubble created by low interest rates. One dissenter said Washington went too far in promoting home ownership - the Great American Dream - at all costs.

But it would be a shame to dismiss the legitimate findings of the Financial Crisis Inquiry Commission as motivated by politics. The report merits serious consideration in an effort to ward off any prospect of another meltdown on Wall Street in the years to come.

After all, as FCIC Chairman Phil Angelides said of the Great American Recession: “None of what happened was an act of God.”